Impact Investing

51 Pages Posted: 20 Dec 2015 Last revised: 7 Aug 2018

Brad M. Barber

University of California, Davis

Adair Morse

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Ayako Yasuda

University of California, Davis - Graduate School of Management

Date Written: August 3, 2018

Abstract

We document that investors derive nonpecuniary utility from investing in dual-objective venture/growth equity funds, thus sacrificing financial returns. In reduced form, impact funds earn 4.7% lower IRRs compared to traditional VC funds. Likewise, random utility/willingness-to-pay (WTP) models of investment choice indicate investors accept 3.4% lower IRRs for impact funds. We rule out alternative interpretations of risk, liquidity, and naiveté. Development organizations, banks, public pensions, Europeans, and UNPRI signatories have high WTP; endowments and private pensions have none. Mission-oriented objectives and local political pressure increase WTP; legal restrictions (e.g., ERISA) decrease WTP.

Keywords: Impact investing; venture capital; private equity; socially responsible investment; United Nations Principles of Responsible Investment (UNPRI); sustainable investing; public pension funds; willingness to pay; random utility discrete choice models

JEL Classification: G11, G21, G22, G23, G24, G28, H41, M14

Suggested Citation

Barber, Brad M. and Morse, Adair and Yasuda, Ayako, Impact Investing (August 3, 2018). Available at SSRN: https://ssrn.com/abstract=2705556 or http://dx.doi.org/10.2139/ssrn.2705556

Brad M. Barber

University of California, Davis ( email )

Graduate School of Management
One Shields Avenue
Davis, CA 95616
United States
530-752-0512 (Phone)
530-752-2924 (Fax)

Adair Morse

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ayako Yasuda (Contact Author)

University of California, Davis - Graduate School of Management ( email )

One Shields Avenue
Davis, CA 95616
United States
530-752-0775 (Phone)
530-752-2924 (Fax)

HOME PAGE: http://www.ayakoyasuda.com

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